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Capital gain on house property

Kavita (CA Job) (51 Points)

28 January 2014

I will explain the query with an example:-

Mr. A and Ms. B are husband wife.
Mr. A's Father registered 1/2 of the house to Ms. B
Mr. A has one brother named "Mr.C"
Mr. A wants to sell his wife's share of house to Mr. C as he is staying in the house and Mr. A does not want the property.
Mr. C does not have money.He is proposing that let Ms. B register the house in his name at agreed consideration, Mr. C will rent out that property and pay the rent to Ms. B till the time agreed price is paid.
How the Capital Gain should be calculated in this scenario?
Consideration will be there in sale deed.

For any more details required please write.

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21 Replies

PUNEET SHARMA (non) (58 Points)
Replied 28 January 2014

what is consideration's amt. ?

what is the agreed date of payment?

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Mihir (Wealth Manager) (5293 Points)
Replied 29 January 2014

Ms B is the co-owner of the house. Who is the other co-owner of the house?

Pavan Jain S (Chartered Accountant) (1575 Points)
Replied 29 January 2014

How will the property be registered unless consideration is paid. As per Stamps Act, the property cannot be registered unless entire consideration is paid

Mahesh SivaramaKrishnan (Forensic Accountant) (25 Points)
Replied 29 January 2014

First thing is as per the clubbing provisions,the capital gain will be taxed in the hands of A's Father and not in Ms.B's hands.

Now with regard to Capital Gain Computation...

Assumed as Long term Capital Asset...

Capital gain arises in the year of transfer and not in the year of receipt,so it will be taxed immediately.

How did A's father acquired this property? If it was with his own funds then the cost acquisition will be as per the deed,but if it was an ancestral property,then the cost of acquisition will be NIL.(this is applicable for both A's Father & Ms.B) In this case the entire sale consideration will be their capital gain.

What will be the consideration ?

Fair Market Value of that property on the date of transfer or agreed consideration whichever is higher.And you can mention in the deed as if Mr.C will be leasing this property to Mr.X and pay the consideration over the period as mutually agreed.

Sale consideration paid immediately or later does not have any relevance in computing capital gain.Here the only concern is CONSIDERATION,it should not be less than FMV.

Hope it gives solution for your query...

Regards

Manish Malpani (Chartered Accountant) (61 Points)
Replied 29 January 2014

Agreed with mr mahesh

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Rachit jain (nil) (34 Points)
Replied 29 January 2014

Clubbing provision attract in this case.. Mr.a's father will pay capital gain in the year in which property transfer

ChanderMohan Garg (student) (24 Points)
Replied 29 January 2014

If consideration is not determinable then FMV of the house on the date of transfer will be the FVC( full value of consideration).

Arpit Pachisia (CA) (734 Points)
Replied 29 January 2014

I will clarify the question first.

Mr's A father purchased a property as on 10/04/1992 on his own name for Rs.2,50,000. than he registered 1/2 of this property on the name of Mrs B wife of Mr A and other 1/2 in the name of his other son Mr C as on 12/04/2012. After few days he expired. Now as neither of Mr A or Mrs B has any interest in such property as they already have one property. Now they want to sell their portion of property to Mr. C who lives in that house for Rs. 15,00,000. But Mr. C doesn't have such big amount with himself, so he proposed Mrs. B to register the property on his name, than he will rent out such property and whatever amount he receives from the rent, he will pay such amount monthly to Mrs. B till the total amount reaches to Rs.15,00,000. Such propasal will be shown in the sale deed also.

Now how to compute capital gain if Mrs. B opted for such propasal and make sale deed as on 29/01/2014 ?

Mihir (Wealth Manager) (5293 Points)
Replied 29 January 2014

If Mr. C is already living in the house, how will he give the same house on rent? Intention of Mr. C to repay Rs. 15 lacs is also uncertain after flat gets transferred in his name.

Mrs. B may prepare a gift deed for her 1/2 share in the flat in favor of Mr. C. When Mr. C manages to collect Rs. 15 lacs from rental income, he may prepare another gift deed transfering Rs. 15 lacs in favor of Mrs. B. Both are relatives as per IT Act, and so non-taxable. But stamp duty and registration will have to be paid for gift deed.

Just an idea.

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Mahesh SivaramaKrishnan (Forensic Accountant) (25 Points)
Replied 29 January 2014

Question originally posted by Kavitha,now Arpit is giving clarifications... How come ?

Is it relevant ?

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Arpit Pachisia (CA) (734 Points)
Replied 30 January 2014

well mahesh I think your this question is irrelevent, as many of the users including you can't clarify the question as many aspects are not clear. So better if you handle the question and need to worry about other peoples.

thank you

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Kavita (CA Job) (51 Points)
Replied 30 January 2014

Assume consideration amount is 10 Lacs . Date of payment as I mentioned is Monthly payment out of Rent received from let out property.

Kavita (CA Job) (51 Points)
Replied 30 January 2014

Yes Ms. B is co-owner of house

Kavita (CA Job) (51 Points)
Replied 30 January 2014

Originally posted by : Mahesh SivaramaKrishnan
	First thing is as per the clubbing provisions,the capital gain will be taxed in the hands of A's Father and not in Ms.B's hands. Now with regard to Capital Gain Computation... Assumed as Long term Capital Asset... Capital gain arises in the year of transfer and not in the year of receipt,so it will be taxed immediately. How did A's father acquired this property? If it was with his own funds then the cost acquisition will be as per the deed,but if it was an ancestral property,then the cost of acquisition will be NIL.(this is applicable for both A's Father & Ms.B) In this case the entire sale consideration will be their capital gain. What will be the consideration ? Fair Market Value of that property on the date of transfer or agreed consideration whichever is higher.And you can mention in the deed as if Mr.C will be leasing this property to Mr.X and pay the consideration over the period as mutually agreed. Sale consideration paid immediately or later does not have any relevance in computing capital gain.Here the only concern is CONSIDERATION,it should not be less than FMV. Hope it gives solution for your query... Regards But Mr. A's father is no more . How the capital gain will be clubbed in his income?